UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2007

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 1-6544

SYSCO CORPORATION

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		74-1648137 (IRS employer identification number)

1390 Enclave Parkway
Houston, Texas 77077-2099
(Address of principal executive offices)
(Zip code)

Registrant’s telephone number, including area code: (281) 584-1390

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer þ      Accelerated Filer o       Non-accelerated Filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)

Yes o No þ

617,956,215 shares of common stock were outstanding as of April 28, 2007.

 

 

TABLE OF CONTENTS

		Page No.
Part I. Financial Information
Item 1. Financial Statements		1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3. Quantitative and Qualitative Disclosures about Market Risk		31
Item 4. Controls and Procedures		32
Part II. Other Information
Item 1. Legal Proceedings		33
Item 1A. Risk Factors		33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		38
Item 3. Defaults Upon Senior Securities		38
Item 4. Submission of Matters to a Vote of Security Holders		38
Item 5. Other Information		39
Item 6. Exhibits		39
Signatures		41
First Amendment to 2004 Long-Term Cash Incentive Plan
Report from Ernst & Young LLP
Acknowledgment Letter from Ernst & Young LLP
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

SYSCO CORPORATION and its Consolidated Subsidiaries

CONSOLIDATED BALANCE SHEETS
(In Thousands Except for Share Data)

		Mar. 31, 2007				July 1, 2006				Apr. 1, 2006
		(unaudited)								(unaudited)
ASSETS
Current assets
Cash		$	180,943			$	201,897			$	205,605
Accounts and notes receivable, less allowances of $60,105, $29,100 and $62,012			2,634,273				2,483,720				2,467,308
Inventories			1,693,084				1,608,233				1,601,250
Prepaid expenses			66,939				59,154				72,049
Prepaid income taxes			—				46,690				—
Total current assets			4,575,239				4,399,694				4,346,212
Plant and equipment at cost, less depreciation			2,649,708				2,464,900				2,399,345
Other assets
Goodwill			1,329,745				1,302,591				1,292,527
Intangibles, less amortization			89,977				95,651				97,733
Restricted cash			101,105				102,274				103,301
Prepaid pension cost			423,607				388,650				408,183
Other assets			257,940				238,265				236,787
Total other assets			2,202,374				2,127,431				2,138,531
Total assets		$	9,427,321			$	8,992,025			$	8,884,088
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Notes payable		$	10,500			$	29,300			$	12,000
Accounts payable			1,982,126				1,891,357				1,839,477
Accrued expenses			810,216				745,781				736,798
Income taxes			119,919				—				47,647
Deferred taxes			357,629				453,700				346,980
Current maturities of long-term debt			104,882				106,265				208,570
Total current liabilities			3,385,272				3,226,403				3,191,472
Other liabilities
Long-term debt			1,633,091				1,627,127				1,787,155
Deferred taxes			688,239				723,349				692,176
Other long-term liabilities			385,198				362,862				413,455
Total other liabilities			2,706,528				2,713,338				2,892,786
Commitments and contingencies
Shareholders’ equity
Preferred stock, par value $1 per share Authorized 1,500,000 shares, issued none			—				—				—
Common stock, par value $1 per share Authorized 2,000,000,000 shares, issued 765,174,900 shares			765,175				765,175				765,175
Paid-in capital			618,087				525,684				498,322
Retained earnings			5,357,045				4,999,440				4,849,518
Other comprehensive income			67,441				84,618				19,870
			6,807,748				6,374,917				6,132,885
Less cost of treasury stock, 148,014,133, 146,279,320 and 146,967,829 shares			3,472,227				3,322,633				3,333,055
Total shareholders’ equity			3,335,521				3,052,284				2,799,830
Total liabilities and shareholders’ equity		$	9,427,321			$	8,992,025			$	8,884,088

Note: The July 1, 2006 balance sheet has been derived from the audited financial statements at that date.

See Notes to Consolidated Financial Statements

SYSCO CORPORATION and its Consolidated Subsidiaries
CONSOLIDATED RESULTS OF OPERATIONS (unaudited)
(In Thousands Except for Share and Per Share Data)

		39-Week Period Ended								13-Week Period Ended
		Mar. 31, 2007				Apr. 1, 2006				Mar. 31, 2007				Apr. 1, 2006
Sales		$	25,813,781			$	24,119,361			$	8,572,961			$	8,137,816
Costs and expenses Cost of sales			20,856,982				19,517,648				6,938,867				6,602,102
Operating expenses			3,757,800				3,541,395				1,249,951				1,193,270
Interest expense			79,472				80,914				25,700				29,441
Other, net			(14,949	)			(6,154	)			(2,536	)			(819	)
Total costs and expenses			24,679,305				23,133,803				8,211,982				7,823,994
Earnings before income taxes and cumulative effect of accounting change			1,134,476				985,558				360,979				313,822
Income taxes			436,791				393,627				139,980				125,283
Earnings before cumulative effect of accounting change			697,685				591,931				220,999				188,539
Cumulative effect of accounting change			—				9,285				—				—
Net earnings		$	697,685			$	601,216			$	220,999			$	188,539
Earnings before cumulative effect of accounting change:
Basic earnings per share		$	1.13			$	0.95			$	0.36			$	0.30
Diluted earnings per share			1.11				0.94				0.35				0.30
Net earnings:
Basic earnings per share			1.13				0.97				0.36				0.30
Diluted earnings per share			1.11				0.95				0.35				0.30
Average shares outstanding			618,988,223				621,995,157				617,678,739				618,973,143
Diluted shares outstanding			626,507,744				629,661,119				625,750,925				625,101,592
Dividends declared per common share		$	0.55			$	0.49			$	0.19			$	0.17

See Notes to Consolidated Financial Statements

SYSCO CORPORATION and its Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
(In Thousands)

		39-Week Period Ended								13-Week Period Ended
		Mar. 31, 2007				Apr. 1, 2006				Mar. 31, 2007				Apr. 1, 2006
Net earnings		$	697,685			$	601,216			$	220,999			$	188,539
Other comprehensive income, net of tax:
Foreign currency translation adjustment			(17,497	)			26,257				5,191				(2,217	)
Change in fair value of forward-starting interest rate swap			—				7,064				—				—
Amortization of cash flow hedge			320				226				107				107
Total other comprehensive income (loss)			(17,177	)			33,547				5,298				(2,110	)
Comprehensive income		$	680,508			$	634,763			$	226,297			$	186,429

See Notes to Consolidated Financial Statements

SYSCO CORPORATION and its Consolidated Subsidiaries
CONSOLIDATED CASH FLOWS (unaudited)
(In Thousands)

		39-Week Period Ended
		Mar. 31, 2007				Apr. 1, 2006
Operating activities:
Net earnings		$	697,685			$	601,216
Adjustments to reconcile net earnings to cash provided by operating activities:
Cumulative effect of accounting change			—				(9,285	)
Share-based compensation expense			69,510				101,944
Depreciation and amortization			270,236				251,955
Deferred tax provision			405,228				365,548
Provision for losses on receivables			23,251				22,508
(Gain) loss on sale of assets			(5,791	)			908
Additional investment in certain assets and liabilities, net of effect of businesses acquired:
(Increase) in receivables			(170,145	)			(158,778	)
(Increase) in inventories			(86,722	)			(118,535	)
(Increase) in prepaid expenses			(7,933	)			(11,333	)
Increase in accounts payable			101,707				11,452
Increase in accrued expenses			54,167				15,387
(Decrease) in accrued income taxes			(352,399	)			(449,976	)
(Increase) in other assets			(26,976	)			(18,040	)
(Increase) decrease in prepaid pension cost and other long-term liabilities, net			(12,621	)			39,724
Excess tax benefits from share-based compensation arrangements			(7,032	)			(5,484	)
Net cash provided by operating activities			952,165				639,211
Investing activities:
Additions to plant and equipment			(457,174	)			(363,909	)
Proceeds from sales of plant and equipment			14,119				13,493
Acquisition of businesses, net of cash acquired			(48,534	)			(109,423	)
Increase in restricted cash			(1,331	)			(1,570	)
Net cash used for investing activities			(492,920	)			(461,409	)
Financing activities:
Bank and commercial paper borrowings (repayments ), net			(10,235	)			282,460
Other debt borrowings			4,480				500,436
Other debt repayments			(7,418	)			(209,625	)
Debt issuance costs			(7	)			(3,998	)
Cash paid for termination of interest rate swap			—				(21,196	)
Common stock reissued from treasury			184,950				104,782
Treasury stock purchases			(329,342	)			(527,616	)
Dividends paid			(328,029	)			(293,535	)
Excess tax benefits from share-based compensation arrangements			7,032				5,484
Net cash used for financing activities			(478,569	)			(162,808	)
Effect of exchange rates on cash			(1,630	)			(1,067	)
Net (decrease) increase in cash			(20,954	)			13,927
Cash at beginning of period			201,897				191,678
Cash at end of period		$	180,943			$	205,605
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest		$	86,733			$	80,064
Income taxes			383,076				472,063

See Notes to Consolidated Financial Statements

SYSCO CORPORATION and its Consolidated Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

	1.		Basis of Presentation
			The consolidated financial statements have been prepared by the company, without audit, with the exception of the July 1, 2006 consolidated balance sheet, which was taken from the audited financial statements included in the company’s Fiscal 2006 Annual Report on Form 10-K. The financial statements include consolidated balance sheets, consolidated results of operations, consolidated statements of comprehensive income and consolidated cash flows. Certain amounts in the prior periods presented have been reclassified to conform to the fiscal 2007 presentation. In the opinion of management, all adjustments, which consist of normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive income and cash flows for all periods presented, have been made.
			These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the company’s Fiscal 2006 Annual Report on Form 10-K.
			A review of the financial information herein has been made by Ernst & Young LLP, independent auditors, in accordance with established professional standards and procedures for such a review. A report from Ernst & Young LLP concerning their review is included as Exhibit 15.1.
	2.		Changes in Accounting
			EITF 04-13 Adoption
			In September 2005, the Emerging Issues Task Force (EITF) reached a consensus on Issue No. 04-13, “Accounting for Purchases and Sales of Inventory With the Same Counterparty,” which requires that two or more inventory transactions with the same counterparty (as defined) should be viewed as a single nonmonetary transaction if the transactions were entered into in contemplation of one another. Exchanges of inventory between entities in the same line of business should be accounted for at fair value or recorded at carrying amounts, depending on the classification of such inventory. This guidance was effective for the fourth quarter of fiscal 2006 for SYSCO. SYSCO has certain transactions where finished goods are purchased from a customer or sourced by that customer for warehousing and distribution and resold to the same customer. These transactions are evidenced by title transfer and are separately invoiced. Historically, the company has recorded such transactions in the Consolidated Results of Operations for purchases within “Cost of Sales” and sales within “Sales.” In fiscal 2007, the company recorded the net effect of such transactions in the Consolidated Results of Operations within “Sales” by reducing sales and cost of sales in the amount of $253,724,000 for the first 39 weeks and $76,718,000 for the third quarter. Prior to the adoption of EITF 04-13, the amounts included in the Consolidated Results of Operations on a gross basis within “Cost of Sales” for the 39 week and 13 week periods ended April 1, 2006 were $279,746,000 and $87,772,000, respectively. Such amounts were not restated when the new standard was adopted because only prospective treatment was allowed.
			Pension Measurement Date Change
			Beginning in fiscal 2006, SYSCO changed the measurement date for its pension and other postretirement benefit plans from fiscal year-end to May 31st, which represented a change in accounting. The one-month acceleration of the measurement date allows additional time for management to evaluate and report the actuarial pension measurements in the year-end

			financial statements and disclosures within the accelerated filing deadlines of the Securities and Exchange Commission. The cumulative effect of this change in accounting was an increase to earnings in the first quarter of fiscal 2006 of $9,285,000, net of tax.
	3.		New Accounting Standards
			FIN 48
			In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” (FIN 48), which clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement No. 109 (SFAS 109). FIN 48 clarifies the application of SFAS 109 by defining criteria that an individual tax position must meet for any part of the benefit of that position to be recognized in the financial statements. Additionally, FIN 48 provides guidance on the measurement, derecognition, classification and disclosure of tax positions, along with accounting for the related interest and penalties. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. SYSCO is currently evaluating the impact the adoption of FIN 48 will have on its consolidated financial statements.
			SFAS 157
			In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. The statement is effective for fiscal years beginning after November 15, 2007. The company is currently evaluating the impact of the provisions of SFAS 157.
			SFAS 158
			In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (SFAS 158). SFAS 158 requires an employer to recognize a plan’s funded status in its statement of financial position, measure a plan’s assets and obligations as of the end of the employer’s fiscal year and recognize the changes in a defined benefit postretirement plan’s funded status in comprehensive income in the year in which the changes occur. SFAS 158’s requirement to recognize the funded status of a benefit plan and new disclosure requirements are effective as of the end of fiscal years ending after December 15, 2006. The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The company is currently evaluating the impact the adoption of SFAS 158 will have on its consolidated financial statements. The effect of adoption at June 30, 2007, SYSCO’s adoption date, or any other future date, cannot be determined, since the impact is dependent upon on the measurements of each plan’s assets and obligations at such date. However, if this standard had been applied at July 1, 2006, the result would have been an increase in current liabilities of approximately $10,000,000, an increase in other long-term liabilities of approximately $145,000,000, a decrease in prepaid pension cost of approximately $160,000,000, a decrease in deferred taxes of approximately $120,000,000 and a decrease in shareholders’ equity of approximately $195,000,000.

			SFAS 159
			In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Liabilities” (SFAS 159). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The company is currently evaluating the impact the adoption of SFAS 159 will have on its consolidated financial statements.
	4.		Restricted Cash
			SYSCO is required by its insurers to collateralize a part of the self-insured portion of its workers’ compensation and liability claims. SYSCO has chosen to satisfy these collateral requirements by depositing funds in insurance trusts.
			In addition, for certain acquisitions, SYSCO has placed funds into escrow to be disbursed to the sellers in the event that specified operating results are attained or contingencies are resolved. During the first 39 weeks of fiscal 2007, $4,000,000 was placed into escrow related to a new acquisition, and escrowed funds in the amount of $2,500,000 were released to sellers of acquired businesses. In addition, escrowed funds of $12,121,000 were released from escrow related to an acquisition for which the contingent consideration period expired without the additional consideration being earned.
			A summary of restricted cash balances appears below:

		Mar. 31, 2007				July 1, 2006				Apr. 1, 2006
Funds deposited in insurance trusts		$	92,105,000			$	82,653,000			$	81,980,000
Escrow funds related to acquisitions			9,000,000				19,621,000				21,321,000
Total		$	101,105,000			$	102,274,000			$	103,301,000

	5.		Debt
			In September 2006, the termination date on the revolving credit facility supporting the company’s U.S. and Canadian commercial paper programs was extended from November 4, 2010 to November 4, 2011 in accordance with the terms of the agreement.
			As of March 31, 2007, SYSCO had uncommitted bank lines of credit which provide for unsecured borrowings for working capital of up to $145,000,000, of which $10,500,000 was outstanding as of March 31, 2007.
			As of March 31, 2007, SYSCO’s outstanding commercial paper issuances were $408,133,000 and were classified as long-term debt since the company’s commercial paper programs are supported by its long-term revolving credit facility in the amount of $750,000,000.
			During the 39-week period ended March 31, 2007, the aggregate of commercial paper issuances and short-term bank borrowings ranged from approximately $356,804,000 to $703,072,000.

			Included in current maturities of long-term debt at March 31, 2007 are the 7.25% senior notes due April 2007 totaling $100,000,000. In April 2007, SYSCO repaid these senior notes at maturity utilizing a combination of cash flow from operations and commercial paper issuances.
	6.		Employee Benefit Plans
			The components of net benefit cost for the 39-week periods presented are as follows:

		Pension Benefits								Other Postretirement Plans
		Mar. 31, 2007				Apr. 1, 2006				Mar. 31, 2007				Apr. 1, 2006
Service cost		$	63,492,000			$	75,021,000			$	339,000			$	384,000
Interest cost			68,484,000				62,703,000				399,000				354,000
Expected return on plan assets			(87,558,000	)			(78,132,000	)			—				—
Amortization of prior service cost			4,264,000				3,699,000				151,000				151,000
Recognized net actuarial loss (gain)			7,266,000				34,653,000				(99,000	)			(12,000	)
Amortization of net transition obligation			—				—				114,000				114,000
Net periodic benefit cost		$	55,948,000			$	97,944,000			$	904,000			$	991,000

The components of net benefit cost for the 13-week periods presented are as follows:

		Pension Benefits								Other Postretirement Plans
		Mar. 31, 2007				Apr. 1, 2006				Mar. 31, 2007				Apr. 1, 2006
Service cost		$	21,164,000			$	25,007,000			$	113,000			$	128,000
Interest cost			22,828,000				20,901,000				133,000				118,000
Expected return on plan assets			(29,186,000	)			(26,044,000	)			—				—
Amortization of prior service cost			1,421,000				1,233,000				50,000				50,000
Recognized net actuarial loss (gain)			2,422,000				11,551,000				(33,000	)			(4,000	)
Amortization of net transition obligation			—				—				38,000				38,000
Net periodic benefit cost		$	18,649,000			$	32,648,000			$	301,000			$	330,000

			SYSCO’s contributions to its defined benefit plans were $68,168,000 and $71,538,000 during the 39-week periods ended March 31, 2007 and April 1, 2006, respectively.
			Although contributions to its qualified pension plan (Retirement Plan) are not required to meet ERISA minimum funding requirements, the company anticipates it will make voluntary contributions of approximately $80,000,000 during fiscal 2007 of which $60,000,000 have been made in the first 39 weeks of fiscal 2007. The company’s contributions to the Supplemental Executive Retirement Plan (SERP) and other post-retirement plans are made in the amounts needed to fund current year benefit payments. The estimated fiscal 2007 contributions to fund benefit payments for the SERP and other post-retirement plans are $10,300,000 and $300,000, respectively.

	7.		Earnings Per Share
			The following table sets forth the computation of basic and diluted earnings per share:

		39-Week Period Ended								13-Week Period Ended
		Mar. 31, 2007				Apr. 1, 2006				Mar. 31, 2007				Apr. 1, 2006
Numerator:
Earnings before cumulative effect of accounting change		$	697,685,000			$	591,931,000			$	220,999,000			$	188,539,000
Cumulative effect of accounting change			—				9,285,000				—				—
Net earnings		$	697,685,000			$	601,216,000			$	220,999,000			$	188,539,000
Denominator:
Weighted-average basic shares outstanding			618,988,223				621,995,157				617,678,739				618,973,143
Dilutive effect of employee and director stock options			7,519,521				7,665,962				8,072,186				6,128,449
Weighted-average diluted shares outstanding			626,507,744				629,661,119				625,750,925				625,101,592
Basic earnings per share:
Earnings before cumulative effect of accounting change		$	1.13			$	0.95			$	0.36			$	0.30
Cumulative effect of accounting change			—				0.02				—				—
Net earnings		$	1.13			$	0.97			$	0.36			$	0.30
Diluted earnings per share:
Earnings before cumulative effect of accounting change		$	1.11			$	0.94			$	0.35			$	0.30
Cumulative effect of accounting change			—				0.01				—				—
Net earnings		$	1.11			$	0.95			$	0.35			$	0.30

			The number of options that were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive was approximately 22,000,000 and 25,000,000 for the first 39 weeks of fiscal 2007 and 2006, respectively. The number of options that were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive was approximately 14,000,000 and 35,000,000 for the third quarter of fiscal 2007 and 2006, respectively.
	8.		Share-Based Compensation
			SYSCO provides compensation benefits to employees and non-employee directors under several share-based payment arrangements including the 2004 Stock Option Plan, the 2005 Non-Employee Directors Stock Plan, the Employees’ Stock Purchase Plan and the Management Incentive Plans.
			SYSCO accounts for share-based compensation using the fair value recognition provisions of FASB Statement No. 123(R), “Share-Based Payment” (SFAS 123(R)), which it adopted using the modified-prospective transition method effective July 3, 2005.

			Stock Option Plans
			SYSCO’s 2004 Stock Option Plan was adopted in fiscal 2005 and reserved 23,500,000 shares of SYSCO common stock for grants of options and dividend equivalents to directors, officers and other employees of the company and its subsidiaries at the fair market value (as defined in the plan) at the date of grant. Options to purchase 6,504,200 and 4,827,500 shares were granted to employees in the first 39 weeks of fiscal 2007 and 2006, respectively.
			SYSCO’s 2005 Non-Employee Directors Stock Plan was adopted in fiscal 2006 and reserved 550,000 shares of common stock for grants to non-employee directors in the form of options, stock grants, restricted stock units and dividend equivalents. In the first 39 weeks of fiscal 2007, options to purchase 35,000 shares and 42,000 shares of restricted stock were granted to non-employee directors. Of the 42,000 shares of restricted stock granted to non-employee directors, 12,000 shares in the aggregate were issued to two new non-employee directors as one-time retainer awards. In the first 39 weeks of fiscal 2006, options to purchase 31,500 shares and 27,000 shares of restricted stock were granted to non-employee directors.
			The fair value of each option award is estimated as of the date of grant using a Black-Scholes option pricing model. The weighted average grant-date fair value per share of options granted during the 39-week periods ended March 31, 2007 and April 1, 2006 was $6.85 and $7.83, respectively.
			Employees’ Stock Purchase Plan
			SYSCO’s Employees’ Stock Purchase Plan permits employees to invest by means of periodic payroll deductions in SYSCO common stock at 85% of the closing price on the last business day of each calendar quarter. Shares of SYSCO common stock purchased by plan participants during the first 39 weeks of fiscal 2007 and 2006 were 1,286,176 and 1,386,124, respectively.
			The weighted average fair value per share of employee stock purchase rights issued pursuant to the Employees’ Stock Purchase Plan was $5.00 and $4.91 during the first 39 weeks of fiscal 2007 and 2006, respectively. The fair value of the stock purchase rights was calculated as the difference between the stock price and the employee purchase price.
			Management Incentive Compensation
			SYSCO’s Management Incentive Plans compensate key management personnel for specific performance achievements. The bonuses earned and expensed under these plans during a fiscal year are paid in the following fiscal year in both cash and stock, and a portion of the cash bonus may be deferred for payment in future years at the election of each participant.
			A total of 323,822 shares and 617,637 shares at a fair value per share of $30.56 and $36.25, respectively, were issued pursuant to these plans in the first quarter of fiscal 2007 and fiscal 2006, respectively, for bonuses earned in the preceding fiscal years.
			All Share-Based Payment Arrangements
			The total share-based compensation cost that has been recognized in results of operations was $69,510,000 and $101,944,000 for the first 39 weeks of fiscal 2007 and fiscal 2006, respectively. The total income tax benefit recognized in results of operations for share-based compensation arrangements was $13,065,000 and $14,186,000 for the first 39 weeks of fiscal 2007 and fiscal 2006, respectively.

			The total share-based compensation cost that has been recognized in results of operations was $19,594,000 and $27,776,000 for the third quarter of fiscal 2007 and fiscal 2006, respectively. The total income tax benefit recognized in results of operations for share-based compensation arrangements was $4,164,000 and $2,816,000 for the third quarter of fiscal 2007 and fiscal 2006, respectively.
			As of March 31, 2007, there was $98,139,000 of total unrecognized compensation cost related to share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of three years.
	9.		Income Taxes
			Reflected in the changes in the net deferred tax liability and prepaid/accrued income tax balances from July 1, 2006 to March 31, 2007 is the reclassification of deferred tax liabilities to accrued income taxes related to supply chain distributions. This reclassification reflects the tax payments to be made during the next twelve months related to previously deferred supply chain distributions.
			The effective tax rate for the first 39 weeks of fiscal 2007 was 38.5%, a decrease from the effective tax rate of 39.9% for the first 39 weeks of fiscal 2006. The decrease in the effective tax rate was primarily due to lower share-based compensation expense in fiscal 2007. SYSCO recorded a tax benefit of $13,065,000, or 18.8% of the total $69,510,000 in share-based compensation expense recorded in the 39-week period ended March 31, 2007. SYSCO recorded a tax benefit of $14,186,000, or 13.9% of the total $101,944,000 in share-based compensation expense recorded in the 39-week period ended April 1, 2006.
			The effective tax rate for the third quarter of fiscal 2007 was 38.8%, a decrease from the effective tax rate of 39.9% for the third quarter of fiscal 2006. The decrease in the effective tax rate was primarily due to lower share-based compensation expense in fiscal 2007. SYSCO recorded a tax benefit of $4,164,000, or 21.3% of the total $19,594,000 in share-based compensation expense recorded in the 13-week period ended March 31, 2007. SYSCO recorded a tax benefit of $2,816,000, or 10.1% of the total $27,776,000 in share-based compensation expense recorded in the 13-week period ended April 1, 2006.
			The determination of the company’s overall effective tax rate requires the use of estimates. The effective tax rate reflects a combination of income earned and taxed in the various U.S. federal and state, as well as Canadian federal and provincial, jurisdictions. Jurisdictional tax law changes, increases/decreases in permanent differences between book and tax items, tax credits and the company’s change in earnings from these taxing jurisdictions all affect the overall effective tax rate.
			As of March 31, 2007, the company’s 2003 and 2004 federal income tax returns were under audit by the Internal Revenue Service (IRS). The company has accrued approximately $14,000,000 for its best estimate of the additional liability required related to certain positions which have been challenged by the IRS on which the company believes it is probable that it will not prevail. This represents an increase of $4,000,000 from the liability of $10,000,000 recorded as of July 1, 2006. SYSCO has received the final summary of proposed adjustments from the IRS, which include, among other items, a current assessment of taxes for which the company has recorded a deferred tax liability related to SYSCO’s affiliate, Baugh Supply Chain Cooperative (BSCC), plus related interest. The company has reviewed the merits of the issues raised by the IRS. The company has not recorded a liability for the interest portion of the assessment proposed by the IRS related to BSCC, nor has it accrued tax or interest related to other disputed assessments, as the company does not believe the loss is probable. See

			further discussion related to BSCC in Note 11 Commitments and Contingencies under the caption “BSCC Cooperative Structure”.
	10.		Acquisitions
			During the first 39 weeks of fiscal 2007, the company paid cash of $48,534,000 for acquisitions made during fiscal 2007 and for contingent consideration related to operations acquired in previous fiscal years. In addition, escrowed funds in the amount of $2,500,000 related to certain acquisitions were released to sellers of previously acquired businesses during the first 39 weeks of fiscal 2007.
			Certain acquisitions involve contingent consideration typically payable only in the event that specified operating results are attained or certain outstanding contingencies are resolved. Aggregate contingent consideration amounts outstanding as of March 31, 2007 included $113,803,000 in cash, which, if distributed, could result in the recording of additional goodwill. Such amounts are to be paid out over periods of up to four years from the date of acquisition if the contingent criteria are met.
	11.		Commitments and Contingencies
			SYSCO is engaged in various legal proceedings which have arisen but have not been fully adjudicated. These proceedings, in the opinion of management, will not have a material adverse effect upon the consolidated financial statements of the company when ultimately concluded.
			Multi-Employer Pension Plans
			SYSCO contributes to several multi-employer defined benefit pension plans based on obligations arising under collective bargaining agreements covering union-represented employees. Approximately 10% of SYSCO’s current employees are participants in such multi-employer plans. In fiscal 2006, total contributions to these plans were approximately $29,796,000. During the first 39 weeks of fiscal 2007, total contributions to these plans were approximately $24,205,000.
			SYSCO does not directly manage these multi-employer plans, which are generally managed by boards of trustees, half of whom are appointed by the unions and the other half by other contributing employers to the plan. Based upon the information available from plan administrators, management believes that some of these multi-employer plans are under-funded due partially to a decline in the value of the assets supporting these plans, a reduction in the number of actively participating members for whom employer contributions are required, and the level of benefits provided by the plans. In addition, the Pension Protection Act, enacted in August 2006, will require under-funded pension plans to improve their funding ratios within prescribed intervals based on the level of their under-funding, perhaps beginning as soon as 2008. As a result, SYSCO’s required contributions to these plans may increase in the future.
			Under current law regarding multi-employer defined benefit plans, a plan’s termination, SYSCO’s voluntary withdrawal, or the mass withdrawal of all contributing employers from any under-funded multi-employer defined benefit plan would require SYSCO to make payments to the plan for SYSCO’s proportionate share of the multi-employer plan’s unfunded vested liabilities. SYSCO does not believe that it is probable that there will be a mass withdrawal of employers from the plan or that any of the plans will terminate in the near future. In addition, if a multi-employer defined benefit plan fails to satisfy certain minimum funding requirements,

			the IRS may impose a nondeductible excise tax of 5% on the amount of the accumulated funding deficiency for those employers contributing to the fund.
			Based on the information available from plan administrators, SYSCO estimates that its share of withdrawal liability on all the multi-employer plans it participates in could be as much as $120,000,000.
			BSCC Cooperative Structure
			SYSCO’s affiliate, BSCC, is a cooperative and taxed under subchapter T of the United States Internal Revenue Code. SYSCO believes that the deferred tax liabilities resulting from the business operations and legal ownership of BSCC are appropriate under the tax laws. However, if the application of the tax laws to the cooperative structure of BSCC were to be successfully challenged by any federal, state or local tax authority, SYSCO could be required to accelerate the payment of all or a portion of its income tax liabilities associated with BSCC that it otherwise has deferred until future periods and be liable for interest on such amounts. As of March 31, 2007, SYSCO has recorded deferred income tax liabilities of $825,000,000 related to the BSCC supply chain distributions. This amount represents the income tax liabilities related to BSCC that were accrued, but the payment had been deferred as of March 31, 2007. In addition, if it were determined that all amounts since the inception of BSCC were inappropriately deferred or that BSCC should have been a taxable entity, SYSCO estimates that in addition to making a current payment for amounts previously deferred (as discussed above), the company may have additional liability (representing interest) that would be payable on the cumulative deferred balances ranging from $160,000,000 to $180,000,000, prior to federal income tax benefit, as of March 31, 2007. SYSCO calculated this amount based upon the amounts deferred since the inception of BSCC applying the applicable jurisdictions’ interest rates in effect in each period. During the third quarter of fiscal 2007, as a part of the IRS’s audit of the 2003 and 2004 federal income tax returns, the IRS proposed adjustments related to the taxability of BSCC. The company plans to vigorously protest these adjustments. The company has reviewed the merits of the issues raised by the IRS and based upon such review, SYSCO believes that the resulting interest is not a probable liability and accordingly, has not recorded any related amount in any period.
			Fuel Commitments
			From time to time, SYSCO may enter into forward purchase commitments for a portion of its projected diesel fuel requirements. As of March 31, 2007, outstanding forward diesel fuel purchase commitments total approximately $67,000,000 at a fixed price through the end of calendar year 2007. These agreements meet the definition of a derivative. However, the company elected to use the normal purchase and sale exemption available under relevant accounting literature, which allows SYSCO to account for these agreements on an accrual basis and thus they are not recorded at fair value.

	12.		Business Segment Information
			The company has aggregated its operating companies into a number of segments, of which only Broadline and SYGMA are reportable segments as defined in SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.” Broadline operating companies distribute a full line of food products and a wide variety of non-food products to both traditional and chain restaurant customers. SYGMA operating companies distribute a full line of food products and a wide variety of non-food products to some of the chain restaurant customer locations. “Other” financial information is attributable to the company’s other segments, including the company’s specialty produce, custom-cut meat and lodging industry segments and a company that distributes to internationally located chain restaurants.
			Intersegment sales represent specialty produce and meat company products distributed by the Broadline and SYGMA operating companies. The segment results include allocation of centrally incurred costs for shared services that are eliminated upon consolidation. Centrally incurred costs are allocated based upon the relative level of service used by each operating company. The company does not allocate to its segments share-based compensation expense related to stock option grants, issuances of stock pursuant to the Employees’ Stock Purchase Plan and restricted stock grants.

		39-Week Period Ended								13-Week Period Ended
		Mar. 31, 2007				Apr. 1, 2006				Mar. 31, 2007				Apr. 1, 2006
Sales (in thousands):
Broadline		$	20,270,627			$	19,098,232			$	6,716,512			$	6,386,905
SYGMA			3,240,706				3,062,546				1,082,534				1,035,287
Other			2,648,772				2,246,939				887,156				815,812
Intersegment sales			(346,324	)			(288,356	)			(113,241	)			(100,188	)
Total		$	25,813,781			$	24,119,361			$	8,572,961			$	8,137,816

		39-Week Period Ended								13-Week Period Ended
		Mar. 31, 2007				Apr. 1, 2006				Mar. 31, 2007				Apr. 1, 2006
Earnings before income taxes and cumulative effect of accounting change (in thousands):
Broadline		$	1,195,941			$	1,093,501			$	375,944			$	346,284
SYGMA			9,858				(699	)			4,077				2,601
Other			93,438				86,733				31,631				28,832
Total segments			1,299,237				1,179,535				411,652				377,717
Unallocated corporate expenses			(164,761	)			(193,977	)			(50,673	)			(63,895	)
Total		$	1,134,476			$	985,558			$	360,979			$	313,822

		Mar. 31, 2007				July 1, 2006				Apr. 1, 2006
Assets (in thousands):
Broadline		$	5,543,427			$	5,248,223			$	5,237,766
SYGMA			378,481				359,116				342,704
Other			934,794				832,223				829,013
Total segments			6,856,702				6,439,562				6,409,483
Corporate			2,570,619				2,552,463				2,474,605
Total		$	9,427,321			$	8,992,025			$	8,884,088

	13.		Supplemental Guarantor Information
			SYSCO International, Co. is an unlimited liability company organized under the laws of the Province of Nova Scotia, Canada and is a wholly-owned subsidiary of SYSCO. In May 2002, SYSCO International, Co. issued, in a private offering, $200,000,000 of 6.10% notes due in 2012. These notes are fully and unconditionally guaranteed by SYSCO.
			The following condensed consolidating financial statements present separately the financial position, results of operations and cash flows of the parent guarantor (SYSCO), the subsidiary issuer (SYSCO International) and all other non-guarantor subsidiaries of SYSCO (Other Non-Guarantor Subsidiaries) on a combined basis and eliminating entries.

		Condensed Consolidating Balance Sheet
		March 31, 2007
						SYSCO				Other Non-Guarantor								Consolidated
		SYSCO				International				Subsidiaries				Eliminations				Totals
		(In thousands)
Current assets		$	164,981			$	2			$	4,410,256			$	—			$	4,575,239
Investment in subsidiaries			12,255,418				320,454				148,061				(12,723,933	)			—
Plant and equipment, net			149,780				—				2,499,928				—				2,649,708
Other assets			755,940				—				1,446,434				—				2,202,374
Total assets		$	13,326,119			$	320,456			$	8,504,679			$	(12,723,933	)		$	9,427,321
Current liabilities		$	388,834			$	4,070			$	2,992,368			$	—			$	3,385,272
Intercompany payables (receivables)			7,787,418				27,058				(7,814,476	)			—				—
Long-term debt			1,367,978				223,920				41,193				—				1,633,091
Other liabilities			537,318				—				536,119				—				1,073,437
Shareholders’ equity			3,244,571				65,408				12,749,475				(12,723,933	)			3,335,521
Total liabilities and shareholders’ equity		$	13,326,119			$	320,456			$	8,504,679			$	(12,723,933	)		$	9,427,321

		Condensed Consolidating Balance Sheet
		July 1, 2006
						SYSCO				Other Non-Guarantor								Consolidated
		SYSCO				International				Subsidiaries				Eliminations				Totals
		(In thousands)
Current assets		$	162,177			$	35			$	4,237,482			$	—			$	4,399,694
Investment in subsidiaries			11,282,232				317,812				125,433				(11,725,477	)			—
Plant and equipment, net			174,020				—				2,290,880				—				2,464,900
Other assets			711,056				—				1,416,375				—				2,127,431
Total assets		$	12,329,485			$	317,847			$	8,070,170			$	(11,725,477	)		$	8,992,025
Current liabilities		$	331,417			$	1,022			$	2,893,964			$	—			$	3,226,403
Intercompany payables (receivables)			7,207,923				38,308				(7,246,231	)			—				—
Long-term debt			1,358,452				224,247				44,428				—				1,627,127
Other liabilities			487,858				—				598,353				—				1,086,211
Shareholders’ equity			2,943,835				54,270				11,779,656				(11,725,477	)			3,052,284
Total liabilities and shareholders’ equity		$	12,329,485			$	317,847			$	8,070,170			$	(11,725,477	)		$	8,992,025

		Condensed Consolidating Balance Sheet
		April 1, 2006
						SYSCO				Other Non-Guarantor								Consolidated
		SYSCO				International				Subsidiaries				Eliminations				Totals
		(In thousands)
Current assets		$	150,938			$	6			$	4,195,268			$	—			$	4,346,212
Investment in subsidiaries			10,879,188				303,341				141,222				(11,323,751	)			—
Plant and equipment, net			149,924				—				2,249,421				—				2,399,345
Other assets			727,605				—				1,410,926				—				2,138,531
Total assets		$	11,907,655			$	303,347			$	7,996,837			$	(11,323,751	)		$	8,884,088
Current liabilities		$	444,645			$	4,201			$	2,742,626			$	—			$	3,191,472
Intercompany payables (receivables)			6,692,232				14,064				(6,706,296	)			—				—
Long-term debt			1,502,833				238,976				45,346				—				1,787,155
Other liabilities			555,102				—				550,529				—				1,105,631
Shareholders’ equity			2,712,843				46,106				11,364,632				(11,323,751	)			2,799,830
Total liabilities and shareholders’ equity		$	11,907,655			$	303,347			$	7,996,837			$	(11,323,751	)		$	8,884,088

		Condensed Consolidating Results of Operations
		For the 39-Week Period Ended March 31, 2007
						SYSCO				Other Non-Guarantor								Consolidated
		SYSCO				International				Subsidiaries				Eliminations				Totals
		(In thousands)
Sales		$	—			$	—			$	25,813,781			$	—			$	25,813,781
Cost of sales			—				—				20,856,982				—				20,856,982
Operating expenses			156,120				96				3,601,584				—				3,757,800
Interest expense (income)			303,451				9,059				(233,038	)			—				79,472
Other, net			(8,129	)			—				(6,820	)			—				(14,949	)
Total costs and expenses			451,442				9,155				24,218,708				—				24,679,305
Earnings (losses) before income taxes and cumulative effect of accounting change			(451,442	)			(9,155	)			1,595,073				—				1,134,476
Income tax (benefit) provision			(182,032	)			(3,572	)			622,395				—				436,791
Equity in earnings of subsidiaries			967,095				12,377				—				(979,472	)			—
Net earnings		$	697,685			$	6,794			$	972,678			$	(979,472	)		$	697,685

		Condensed Consolidating Results of Operations
		For the 39-Week Period Ended April 1, 2006
						SYSCO				Other Non-Guarantor								Consolidated
		SYSCO				International				Subsidiaries				Eliminations				Totals
		(In thousands)
Sales		$	—			$	—			$	24,119,361			$	—			$	24,119,361
Cost of sales			—				—				19,517,648				—				19,517,648
Operating expenses			175,486				81				3,365,828				—				3,541,395
Interest expense (income)			274,951				8,439				(202,476	)			—				80,914
Other, net			(1,920	)			—				(4,234	)			—				(6,154	)
Total costs and expenses			448,517				8,520				22,676,766				—				23,133,803
Earnings (losses) before income taxes and cumulative effect of accounting change			(448,517	)			(8,520	)			1,442,595				—				985,558
Income tax (benefit) provision			(144,151	)			(3,195	)			540,973				—				393,627
Equity in earnings of subsidiaries			896,297				4,273				—				(900,570	)			—
Net earnings before cumulative effect of accounting change			591,931				(1,052	)			901,622				(900,570	)			591,931
Cumulative effect of accounting change			9,285				—				—				—				9,285
Net earnings		$	601,216			$	(1,052	)		$	901,622			$	(900,570	)		$	601,216

		Condensed Consolidating Results of Operations
		13-Week Period Ended March 31, 2007
						SYSCO				Other Non-Guarantor								Consolidated
		SYSCO				International				Subsidiaries				Eliminations				Totals
		(In thousands)
Sales		$	—			$	—			$	8,572,961			$	—			$	8,572,961
Cost of sales			—				—				6,938,867				—				6,938,867
Operating expenses			54,999				33				1,194,919				—				1,249,951
Interest expense (income)			103,727				3,019				(81,046	)			—				25,700
Other, net			(961	)			—				(1,575	)			—				(2,536	)
Total costs and expenses			157,765				3,052				8,051,165				—				8,211,982
Earnings (losses) before income taxes			(157,765	)			(3,052	)			521,796				—				360,979
Income tax (benefit) provision			(63,286	)			(1,195	)			204,461				—				139,980
Equity in earnings of Subsidiaries			315,478				585				—				(316,063	)			—
Net earnings		$	220,999			$	(1,272	)		$	317,335			$	(316,063	)		$	220,999

		Condensed Consolidating Results of Operations
		13-Week Period Ended April 1, 2006
						SYSCO				Other Non-Guarantor								Consolidated
		SYSCO				International				Subsidiaries				Eliminations				Totals
		(In thousands)
Sales		$	—			$	—			$	8,137,816			$	—			$	8,137,816
Cost of sales			—				—				6,602,102				—				6,602,102
Operating expenses			56,592				14				1,136,664				—				1,193,270
Interest expense (income)			98,607				3,066				(72,232	)			—				29,441
Other, net			(688	)			—				(131	)			—				(819	)
Total costs and expenses			154,511				3,080				7,666,403				—				7,823,994
Earnings (losses) before income taxes			(154,511	)			(3,080	)			471,413				—				313,822
Income tax (benefit) provision			(50,341	)			(1,155	)			176,779				—				125,283
Equity in earnings of Subsidiaries			292,709				125				—				(292,834	)			—
Net earnings (loss)		$	188,539			$	(1,800	)		$	294,634			$	(292,834	)		$	188,539

		Condensed Consolidating Cash Flows
		39-Week Period Ended March 31, 2007
						SYSCO				Other Non-Guarantor				Consolidated
		SYSCO				International				Subsidiaries				Totals
		(In thousands)
Net cash provided by (used for):
Operating activities		$	(107,737	)		$	(2,500	)		$	1,062,402			$	952,165
Investing activities			(1,531	)			—				(491,389	)			(492,920	)
Financing activities			(474,423	)			(327	)			(3,819	)			(478,569	)
Effect of exchange rate on cash			—				—				(1,630	)			(1,630	)
Intercompany activity			577,074				2,827				(579,901	)			—
Net decrease in cash			(6,617	)			—				(14,337	)			(20,954	)
Cash at the beginning of the period			131,275				—				70,622				201,897
Cash at the end of the period		$	124,658			$	—			$	56,285			$	180,943